@KBank Final

Thammasat
KasikornBank Group Consulting

KASIKORNBANK GROUP
By:
Chananun
Pantira
Pantharee
Tanwa
Thammasat
AGENDA
• Company Profile
• Situation Analysis
• Issues and Objectives Identification
• Recommendations
• TimeLine
• Financial Justification
• Key Success Factors
• Conclusion
Thammasat
Company Profile
• Leading KasikornBankGroup
Financial Institution in Thailand
• Founded in 1945
• Listed on SET in 1976
Kasikorn Bank
• Reinvented the Entire Corporation in 2005
as KLeasing KFactoring
“KASIKORNBANKGROUP”
KSecurititesitselfKAsset
 promoting as Management
‘full-range of financial service provider’
KResearch
• Moving toward Center
“K Excellence” Concept
Mr.Banthoon Lamsam
CEO, KasikornBank
Thammasat
Situation Analysis
1997 1998 2000 2006
Financial NPLs = 43% of

Crisis total
outstanding
loan
Thammasat
Situation Analysis
1997 1998 2000 2006
BOT’s “Financial Master

Plan” NPL s decreased to 8.29%
(FMP)
M&A of Small and

Medium Banks
Promote “Universal
Intense Banks”
Competition
Opening FTA with USA
Thammasat
Situation Analysis
1997 1998 2000 2006
Slow Down in Economy

Expansion
• Rising oil price
• Rising interest rates
M&A of Small and
Medium Banks
Promote “Universal
Intense Banks”
Competition
Opening FTA with USA
Thammasat
Situation Analysis
Industry Customer Segment
Corporate SME 36.39%

45.45%
End consumer
18.16%
Thammasat
Situation Analysis
Industry Customer Segment
TMB 15.9%
BBL 27.72%
KBank 29.46%
Corporate SME 36.39% KTB 17.84%
45.45%
End consumer SCB 9.07%
18.16%
TMB 13.64%
BBL 24.97%
KBank is Losing its
Leading Position to BBL
KBank 12.22%
TMB 9.86%
SCB 14.88%
KTB 34.29% BBL 20.83%
KBank 15.81%
SCB 32.04%
KTB 21.45%
Thammasat
Issues Identification
Where Kasikorn Is Where Kasikorn Wants to Acheive
One of the top 5 Maintain the

Thai banks Intense Leadership
Providing one Competition Position in
stop financial Thai Banking
service To Industry in
Strengthen terms of Size
With the position Collaboration and Market
of innovative Among Share
and modern Subsidiaries
Thammasat
Issues Identification
Issues Objectives
Intense Maintain leading position

Competitio
in the industry
n
Strengthenin Create & realize synergy

Fast g
growing Thai
and provide
Automotive market
Collaboration
Among
high quality services
Subsidiaries
Thammasat
Recommendation I
ng Off Intense Competition and Maintain Leadership Position in Banking Business
Target Selection
Fast Growing
Segment :
• Corporate 29%
Emerging
Opportunity • End Consumer
15%
• SME 56%
K-Bank’s
Current Focus
K Bank Customer Segment
Thammasat
Recommendation I
Target Selection
SMEs End Consumers

Loan Growth 12%

15%
NIM 3%
6%
Size of Account Bigger

 Smaller
Current Position in the Rank 1 : Rank 4 :

Market 
Market Share 29.46 % Market Share 15.81%
Compatibility with Core Key: Key:
Competency - Full Range of Services - Physical Accessibility
- Customer Relationship
K-Bank: 
• High Range of Product and
K-Bank:
Services Low number of Branches
• Customer Care
Thammasat
Recommendation I
SME
Winning Strategy
Thammasat
Recommendation I
I. SME Winning Strategy
Product + Service Features

Product/Service First Mover in terms of
Loan Innovative
Financial Product Offering
Quality &
Enhancement Fee Products Personalized Catering to
Specific Business Needs
Distribution Channels
Implementation
Use of Tailored Package for:
+ “Alternative” Channel
along with Traditional Branches
- Production
- Retail
- Wholesales
- Service
Implementation
E-Channel
Marketing
Communication CRMknow-how and innovativeness
 Capitalize on our technological
 Match with KBank’s Lesser Number of Branches
• Data Collection Human Resource
• Customer Concentration
Information Technology
Thammasat
Recommendation I
Communication Strategies
Product/Service Recent Campaign : K Heroes

Quality
Enhancement Objective:
Raising the Awareness of KBank
as a Modern Bank  Providing
High-Tech with High-Touch service
+ Target Audience: General Consumers
Our Proposing Campaign…

Marketing
Communication “Tailored Communication
Message”
Target Audience: Existing and Potential SME
Operators
Thammasat
Recommendation I
Communication Strategies
Product/Service
Quality Our Proposing Campaign…
Enhancement “Tailored Communication
Message”
Target Audience: Existing and Potential SME
Operators
+ K-Answer : Your Ultimate Solution
Professional + Personal Consultant

Marketing
Communication
Thammasat
Recommendation II
Enhancing Collaboration Among Subsidiaries
Synergy Formulation Strategy
Thammasat
Recommendation II
II. Synergy Formulation Strategy
Collaborative Process Enhancement

Strengthening the Common Goal of
Being a Complete Financial Solution
Implementation:
Strong Leadership and
Supporting Management
HRM: “Knowledge Building Workgroup”
Educate Employees about Functions and
Operations of Each Subsidiary
 Pathway to Smooth Coordination
Informational Flow
 Promoting Information Sharing
Thammasat
Recommendation II
II. Synergy Formulation Strategy
Collaborative Process Enhancement

Customer Reach Out
•Physical Distribution
Increase Availability of all Subsidiaries in
Majority of Branches
•Promotion Package
Implementation Tactics:
• Product Bundling
• Cross – Selling
Thammasat
Timeline
2006 2007 2008 2009 2010 2011
Activities
SME Winning Strategy
Features R&D Setting Up Fully-Functional & Develop new products
E-Channel Promotion Prepare & Testing Communicate to customers

CRM Data MiningTraining Offers high quality services to customers
K-Answer Campaign
Preparation Launch Follow-up
Collaboration and Leadership

Internal Communication and Training
Customer Reachout
• Increase Availability Expand subsidiaries presence
• Promotional Package Package Design Bundling and Cross-selling
Thammasat
Financial Justification
2005 2006F 2007F 2008F 2009F 2010F

Total Revenue Projections
(Bn) 50.37 54.86 60.11 66.14 73.63 81.59
90,000
80,000 CAGR = 10.13%

70,000 Total Growth = 62%
60,000
50,000
Strong synergy among operations
40,000
30,000
Strengthen position in SMEs segment
20,000
10,000
0
2005 2006F 2007F 2008F 2009F 2010F
Thammasat
2005 2006F 2007F 2008F 2009F 2010F

Net Income Projections
(Bn) 13.93 13.94 15.22 16.29 18.33 21.53
25,000
20,000
15,000
10,000
Total Growth = 55%
5,000
CAGR = 9.10%
0
2005 2006F 2007F 2008F 2009F 2010F
Thammasat
Capital Expenditure
Increase in PPE needed to support the growth
ie. Increase in Branches
Infrastructure Improvement
Information system upgrade
ETC.
Total Capital Expenditure in the next
48.76 Billions Baht
5 years
Expenses
Product/Service Quality Enhancement
Research and Development 100-200M / Year
CRM Cost 200-300M / Year
K-Answer Campaign 200-400M / Year
E-channel Promotion 60-100M / Year

Promote internal communication and training 100-200M / Year
Customer Reach-out Campaign 100-250M/ Year
Total Expense 660-1150 Mb /Year
Thammasat
Financing Option Return on Investment
• 67.73 BnB from Long-Term • NPV = 35.14 BnB

Obligations
• PI = 1.96
• 30 BnB from Short-term
debt instrument • PBP = 2.86 Years
• The rest can be financed

with internal generated
fund
Thammasat
Key Success Factor
Target
Selection
Collaboration Customer
Among Orientation
Subsidiaries
Thammasat
Issues are Solved…
Issues Strategies Objectives
Target Selection Maintain

Intense Competition SME Winning Leadership
Strategy Position in
the Banking
Synergy Collaboration Industry
Strategy
Strengthening Collaboration Create & Realize

Collaboration Process Synergy and
Enhancement
Among Subsidiaries Become Truly
Universal Bank
Customer Reach
To Maintain the Leadership Position in terms of Size and

Market Share in Thai Banking Industry Amid the Intense
Competition Thammasat
Thammasat
Thank you
Q&A Session
Thammasat
Slides Navigator
• Company Profile • Timeline

• Situation Analysis • Financial Justification
– Timeline – Revenue Growth
– Customer Breakdown – Net Income Growth
• Issue – Cost Estimation
• Recommendation I – Return on Investment
– Target Selection • Key Success Factor
– Table: SME VS End consumer • Conclusions
– SME Winning Strategy (Product)
– SME Winning Strategy (Marketing)
• Recommendation II
– Synergy Formulation Strategy
– Customer Reach out
Thammasat
Back Up Navigator
Issues I Issue II
Target Selection Synergy formulation
• Why not Select Corporate?
SME Winning Strategy • Increasing Availability of 5 subsidiaries i
• SME Innovative and Personalize KBank
• Why not relied on Physical Branches? • How can collaboration leading to becom
• Alternative “E-Branch” • Cross selling
• E-banking • Product Bundling
• K-Answer
• K-answer contradict current position or not?
• Why SME?
• Pricing for SME
• Competitive Analysis For SME Sector
Thammasat
Finance Navigator Misc.
• Loan Growth Justification • SWOT
• Loan Growth Quantification • Competitive Analysis
• • Porter’s 5 Forces
Non-Interest income growth Justification
• Fee income strategy for Retail Segment
• Deposit growth Justification • Are we not concerning Fee income for En
• Balance Sheet/1, /2 • Why not emphasized on fee income des
• Income Statement/1, /2
• Fee Income Breakdown – 2005
• High Cost-Income Ratio
• Assumptions
• Ratios • Merging opportunity
• Cost Estimation Justification • International Opportunity
• Financing Options Justification
• How can loan mix represent the whole re
• Return on Investment Justification
• Revenue Breakdown – KBANK Historical
• Situation Analysis
Thammasat
Strengths
• Local knowledge over foreign competitors
• Financial position: high margin (NIM)
• Qualified human resources
• Good management (Asia’s Best Management Company)
• Innovative (first Thai bank that offer full financial services)
• Lowest NPL compared top 5 bank: good selection and management of loan
customer
Thammasat
Weaknesses
• Low number of branches
• High operating expense (cost to income ratio)
• Low customers’ confidence in terms of well establishment
• No distinctive competency
Thammasat
Opportunities
• Increase penetration to household consumers
• Increase accessibility to customers in rural areas
• Merger & Acquisitions with international/local banks
• Growth in fee income
• Insurance service
• International Expansion
Thammasat
Threats
• FTA with the U.S.  intense competition from foreign banks
• Increase competition from smaller banks because of mergers and
acquisitions trend, specialized financial institutions, and non-
financial institutions
• Competition from
• Rising oil price
• Increased interest rates  slow down investment rates
• Being in Banking industry makes it volatile to changes in
government regulations
Thammasat
Competitive Analysis
BBL Krung Thai SCB KBank Thai Military International
Bank Bank Bank
Competitive •Brand power •Transaction •Retail banking •Range of • N/A •Economies of

Advantage infrastructure process Product and scale
services •Reputation
• Modern •Multinational
Technology co. as
customers
NPL 10.9% 10.9% 9.3% 8.9% 12.1% N/A
Customer Corporate  SME  Individual SME SME &Individual N/A

focus SME Corporate
Total Asset 1.4 trillion baht 1.2 trillion baht 0.93 trillion 0.89 trillion 0.73 trillion N/A
Revenue 75,045.24 57,702.17 49,484.90 million 50,367.49 31,714.40 N/A

(31/12/2005) million baht million baht baht million baht million baht
Position Long Convenient & Modern Modern N/A N/A

Establishment Trendy (Innovative)
Revenue 9.89% 4.57% 0.78% 11.69% 43.32% N/A

growth
Thammasat
Porter’s 5 Forces
Threat of Substitute Products
High: the industry is very competitive, everyone is always trying to come
up with new and innovative products
Customers
Supplier Bargaining Power
Rivalry among Competing Sellers
Bargaining Power Corporate: high
High: from top5 Thai banks, smaller
Low: from the companies that we SMEs: low
banks that are reducing in numbers but
outsource from such as IT providers Retail: low
increasing in size from merger
company &acquisitions trend, specialized
financial institutions, non-financial
institutions, and foreign banks
Threat of New Entrants

Local: low because of rules & regulations, capital intensive business
Foreign: high in the future when there’s a full liberalization
Thammasat
Fee income strategy for Retail Segment
• Product offering
– Credit card
– ATM
• Offer cross selling and product bundling
• Promotion
– PR
– Marketing Event
• Distribution channel
– Set up boot at department store for credit card application
Thammasat
SME Innovative and Personalize
• Innovative – be the first to offer financial products that are
not yet served in Thailand i.e. Money market mutual fund
• Personalize
– Based on type of business
• Production
• Retail
• Wholesale
• Service
– Provides Personal consultant
• Experience on each industry
• Provides guidance for new SME
– Call center
• 24 hours service providers
Thammasat
Why not relied on Physical Branches?
• Customer relationship management is the main point in

drawing SME into selecting the banking
• KBank is weaker in term of number of branches
– Rank 4th out of the top 5
• Create high expense in opening new branches
Thammasat
Alternative “E-Branch”
• We are not neglecting the physical branch the E-Branch

would serve as an alternative marketing channel to provide:
– Convenient
– Accessibility
– Personalization
– Information flow
• And to best serve our customers.
Thammasat
E-banking
• Provides as an alternative channel of Payment

• For better service coverage in response to the growing
demand
• Continue to upgrade product and service
• E- Banking Channel
– Internet
– Phone
– ATM
Thammasat
High Cost-Income Ratio
• Even though the cost-income ratio is higher than other top

5 banks
• The reason is due to it high fee and services expenses
which grows as the fee and service income grows
• KBank has high fee and service income percentage
compared to other top5 banks
• Therefore, it is not necessary that the high cost-income
ratio of KBank stems from inefficiency problem
Thammasat
Why not Select Corporate?
• High Bargaining Power and price sensitive

• Low Growth (4% IN 2004)
• Low NIM (2% IN 2004)
• Corporate usually choose bank through:
– Price
– Relationship
• KBank is also far behind in terms of the market share
between the top 5 banks.
Thammasat
K-Answer
• Target customer: SME

• Communication message provide Professional and
Personal consultant
• Communication channel
– Mass media
• TV
• Radio
– Road show i.e. at the SMEs Fair
– Organize a Seminar  also the way to gain more
awareness through PR
Thammasat
K-answer contradict current position or not?
• No, It will not come in contradiction

• Current position – modern and innovative
• K-Answer still maintain the modern and innovative position
• Also suit with the concept of the overall objective
– “K Excellence”
Thammasat
Cross selling
• The strategy of pushing new products to current customers based on their
past purchases – thus the product is personalized
• Cross-selling is designed to widen the customer's reliance on the company

and decrease the likelihood of the customer switching to a competitor.
• The key step consists of

– Knowing your products
– Knowing your customers
– Asking questions and listen for clues
– Assessing customers' needs and propose only appropriate products, and
– Treating the sale as a suggestion, that way clients will feel comfortable about
volunteering the information and it is easy for the customer to accept the offer
i.e. Cross –sell KBANK with KASSET
Thammasat
Product Bundling
• Offering several product for sale as one combined product

• Different from cross-selling because it is not personalized to
each customer but already designed before hand
i.e. Matching: KBANK with KLICENSING
Thammasat
Are we not concerning Fee income for End
consumer?
• No we are still offering services to end consumer but we believe
that SME is the right target at the moment
• According to the case, product that will boost the fee income
consists of:
– Under writing
– L/C fee
– Foreign Exchange
– Trade finance transaction
• These are all business source
• Fee income from end consumers account for only 20% of total fee
income
Thammasat
Merging opportunity
• Despite the trend of M&A in the industry – it is not feasible

for KBank to merge with anyone due to
– No viable target exist

– The risk of unfit corporate cultures
Thammasat
How can loan mix represent the whole
revenue structure?
• Loan Mix tell us who are each customer segment and in
what proportion they account for
• We should be able to assume the loan mix of customer

proportion to be the same for customers for other products
• Because
– Loan represent main source of income for banks (63%)
– The customers that lend money from the banks should do
other activities at the same proportion
Thammasat
Why SME?
• In 2004
• All business consists of
2,166,621
• SME consists of 2,161,577
2200
• Consists of 99.8% of all
2150
businesses in Thailand
2100
• Growth rate 8 %
2050 Total Business
SME
2000
1950
1900
2003 2004 In thousand
Source: http://www.sme.go.th
Thammasat
Why not emphasized on fee income despite
slow economic expansion?
Industry Ratio 2003 2004 2005
Net Interest income growth 12% 13% 43%
Fee income growth 3% 10% 15%
% of fee income to total income 25% 24% 20%
NPL 12.87% 10.92% 8.29%
LDR 87% 91% 90%
NIM 2.11% 2.64% 2.85%
• Fee income is not that attractive

•Less growth compared to net interest income
•Loan has become more interesting during the past few years
•NPL decreased  loan quality improved significantly
•LDR constant (at lower than 1)  Loan<Deposit meaning that the
competition for deposit to finance loan should not be high  margin
of loan won’t be decreased
•NIM increase  makes loan more attractive than before
• Expect this to be a short term thing
• Due to current political instability
• GDP has been growing for the past 5 years
• Can expect elastic demand for oil price in the future  expect drop in
price
Thammasat
Pricing for SME
• WILL NOT focus on competitive pricing

• Rationales:
– SME has lower bargaining power compared to large
corporations
– We will emphasize on other value added competitive
features e.g. personalized services, consulting services,
call center, etc.
• Therefore, with full range of product offering, KBank

will not have to focus on competitive pricing
Thammasat
Competitive Analysis For SME Sector
• Bangkok Bank – same product offering

– Strength: long establishment  good reputation
Higher total asset  high capital budget
• SME Bank – More specialize with competitive price but do

not offer full range of service
Thammasat
International Opportunity
• We have plan to expand internationally but it’s still not our main
focus in this presentation because there are still other issues that
needed to be taken care of in a short run
• Proposing Long Term Plan to Expand Internationally

1st STEP: Enhance on exiting countries KBank already has branches in
• Los Angeles, Hong Kong, Cayman Island, Shenzhen
2nd STEP: Expand to other countries
– Criteria : Existing customer of KBank Often visit that country
Country’s GDP
– Possible Location:
• Major cities of US
• Japan
• China
• Product Focus: Initial stage  Fee Products
Thammasat
Increasing Availability of 5 subsidiaries in
KBank
• We are unable to obtain information about existing
presence of K-subsidiaries in KBank (in how many and
which branches)
• According to the case writer, K-subsidiaries only exist in a
few large KBank branches
• Therefore, our goal is to increase presence of K-subsidiaries
in the majority of KBank branches
• Criteria:
– Revenue exceed certain level
– Number of Customers
• Doesn’t have to integrate all K’s at the same time – may do
it one by one – but need to start
Thammasat
How can collaboration leading to becoming
truly universal bank?
• Collaboration would make all subsidiaries work together
very well – as if it is one company
• Ultimately, it will allow the customers to stop at any of the
KBank branches and be served with the service of all
subsidiaries under KGroup
• Thus, KGroup would become a “truly Universal Bank”
Thammasat
How can we evaluate the success of synergy
realization?
• Measure the success by
– Percentage Income from cross-selling and product bundling
– Reduce in communication errors between business units
Thammasat
Loan Growth Justification
• Loan income is a major part in the bank revenue. (63% in 2005)

• The growth component is calculated from 2 factors. The market growth and the
market share of the KBANK.
• The growth of the market is forecasted in the case at 12%, 15%, 4% for SMEs,
Consumer and Corporate segment respectively.
• This is the market share projection for KBANK
Market Share - Loan

SMEs 29.46% 30% 31% 32% 33% 34%
Consumer 15.82% 15.82% 15.82% 15.82% 15.82% 15.82%
Corporate 12.22% 12% 11.50% 11% 11% 10.50%
• With the above information, we forecast the loan portion of income fairly accurately.
Thammasat
Loan Growth Quantification
2005 2006F 2007F 2008F 2009F 2010F
Loan market growth
SMEs 12% 12% 12% 12% 12% 12%
Consumer 15% 15% 15% 15% 15% 15%
Corporate 4% 4% 4% 4% 4% 4%
Total Market (in 5 banks)

SMEs 60,116 67,329 75,409 84,458 94,593 105,944
Consumer 29,998 34,498 39,673 45,624 52,467 60,337
Corporate 75,072 78,075 81,198 84,446 87,823 91,336
Total Market (in 5 banks) 165,186 179,902 196,279 214,527 234,884 257,618
Market Share - Loan

SMEs 29.46% 30% 31% 32% 33% 34%
Consumer 15.82% 15.82% 15.82% 15.82% 15.82% 15.82%
Corporate 12.22% 12% 11.50% 11% 11% 10.50%
Loan Income
SMEs 17,712 20,199 23,377 27,027 31,216 36,021
Consumer 4,744 5,458 6,276 7,218 8,300 9,545
Corporate 9,172 9,369 9,338 9,289 9,661 9,590
Total 31,628 35,025 38,991 43,533 49,177 55,157
Loan Yield 5.04% 5.04% 5.04% 5.04% 5.04% 5.04%
Loan Amount
SMEs 184,698 188,084 194,353 200,623 206,892 213,162
Consumer 99,183 99,183 99,183 99,183 99,183 99,183
Corporate 76,613 75,234 72,099 68,964 68,964 65,829
Total 626,946 693,572 769,048 855,270 971,869 1,092,212
Thammasat
Non-Interest income growth Justification
• Since, we’re targeting SMEs, and our position is to be a full-one stop service,
therefore, it is highly probable that our customer will use more than one of our
services.
• So we believe it is logical for us to forecast the growth in none-income item to
grow along side with our loan portion of our income, and at a slightly faster rate
due to the smaller denominator.
Thammasat
Deposit growth Justification
• Since we do not have a strategy that focus on increasing the deposits, we

have forecast it to grow along with the GDP.
• However, in the next few years it is expected to grow faster because it is
negatively correlated to the overall economic condition.
• The cost of deposit will also grows as well as more banks compete for the
deposits (but not really a big change)
Thammasat
Balance Sheet/1
2004 2005 2006F 2007F 2008F 2009F 2010F
Assets
Cash 13,536 14,913 16,244 17,798 19,583 3,799 9,157
Interbank and money market items
Domestic items
Interest bearing 1,218 4,926 4,926 4,926 4,926 4,926 4,926
Non-interest bearing 2,135 1,709 1,709 1,709 1,709 1,709 1,709
Foreign items
Non-interest bearing 927 499 499 499 499 499 499
Total Interbank and Money Market Items - net 76,249 65,929 65,929 65,929 65,929 65,929 65,929
Securities purchased under resale agreements 19,040 9,500 9,500 9,500 9,500 9,500 9,500
Investments
Current investments - net 33,325 50,105 50,105 50,105 50,105 50,105 50,105
Long-term investments - net 76,770 49,009 49,009 49,009 49,009 49,009 49,009
Investments in subsidiaries and associated companies - net 462 450 450 450 450 450 450
Total Investments - net 110,557 99,564 99,564 99,564 99,564 99,564 99,564
Loans and accrued interest receivables
Loans 592,588 626,946 693,572 769,048 855,270 971,869 1,092,212
Accrued interest receivables 2,455 1,745 1,930 2,141 2,381 2,705 3,040
Total Loans and Accrued Interest Receivables 595,043 628,691 695,502 771,189 857,651 974,574 1,095,252
Less Allowance for doubtful accounts -41,465 -34,766 -38,568 -42,765 -47,559 -54,043 -60,735
Less Revaluation allowance for debt restructuring -4,878 -2,672 -2,672 -2,672 -2,672 -2,672 -2,672
Total Loans and Accrued Interest Receivables - net 548,700 591,253 654,263 725,752 807,419 917,859 1,031,845
Properties foreclosed - net 17,397 17,463 17,463 17,463 17,463 17,463 17,463
Customers’ liability under acceptances 743 857 857 857 857 857 857
Premises and equipment - net 19,747 21,440 30,359 34,544 45,045 53,279 53,830
Intangible assets - net 3,523 4,900 4,900 4,900 4,900 4,900 4,900
Derivative revaluation 6,349 3,278 3,278 3,278 3,278 3,278 3,278
Other assets - net 9,133 8,211 8,211 8,211 8,211 8,211 8,211
Total Assets 824,974 837,308 910,567 987,797 1,081,749 1,184,639 1,304,534
Thammasat
Balance Sheet/2
Liabilities and Shareholders’ Equity
Deposits
Deposits in baht 701,713 684,056 725,099 775,856 834,046 900,769 968,327
Deposits in foreign currencies 3,856 3,725 3,725 3,725 3,725 3,725 3,725
Total Deposits 705,569 687,781 728,824 779,581 837,771 904,494 972,052
Interbank and money market items
Domestic items
Non-interest bearing 3,183 3,385 3,385 3,385 3,385 3,385 3,385
Foreign items
Interest bearing 19 152 152 152 152 152 152
Non-interest bearing 256 290 290 290 290 290 290
Total Interbank and Money Market Items 11,526 19,508 19,508 19,508 19,508 19,508 19,508
Liability payable on demand 7,426 5,904 5,904 5,904 5,904 5,904 5,904
Borrowings
Short-term borrowings 3,843 7,557 13,371 16,298 21,706 22,893 37,473
Long-term borrowings 19,768 20,170 32,634 40,964 55,028 71,681 87,903
Total Borrowings 23,611 27,727 46,005 57,262 76,734 94,574 125,376
Bank’s liability under acceptances 743 857 857 857 857 857 857
Derivative revaluation 1,441 3,034 3,034 3,034 3,034 3,034 3,034
Other liabilities 7,993 14,381 14,381 14,381 14,381 14,381 14,381
Total Liabilities 758,309 759,192 818,513 880,527 958,189 1,042,752 1,141,112
Shareholders’ equity
Share capital
Issued and paid-up share capital
ordinary shares, Baht 10 par value 23,636 23,733 23,733 23,733 23,733 23,733 23,733
Premium on ordinary shares 17,555 17,737 17,737 17,737 17,737 17,737 17,737
Appraisal surplus on asset revaluation 8,762 10,024 10,024 10,024 10,024 10,024 10,024
Revaluation (deficit) on investments 952 -529 -529 -529 -529 -529 -529
Retained earnings
Appropriated
Legal reserve 770 1,470 1,470 1,470 1,470 1,470 1,470
Unappropriated 14,672 25,679 39,617 54,833 71,123 89,450 110,985
Shareholders’ equity before minority interest. 66,347 78,114 92,052 107,268 123,558 141,885 163,420
Minority interests 318 2 2 2 2 2 2
Total Shareholders’ Equity 66,665 78,116 92,054 107,270 123,560 141,887 163,422
Total Liabilities and Shareholders’ Equity 824,974 837,308 910,567 987,797 1,081,749 1,184,640 1,304,534
Thammasat
Income Statement/1
2004 2005 2006F 2007F 2008F 2009F 2010F

Interest and dividend income
Loans 27,712 31,628 35,025 38,991 43,533 49,177 55,157
Interbank and money market items 1,527 2,387 2,387 2,387 2,387 2,387 2,387
Investments 3,760 4,051 4,051 4,051 4,051 4,051 4,051
Total Interest and Dividend Income 32,999 38,066 41,463 45,429 49,971 55,615 61,595
Interest expense
Deposits 5,548 5,703 6,012 6,517 7,089 7,747 8,328
Interbank and money market items 230 387 387 387 387 387 387
Short-term borrowings 5 59 104 127 169 179 292
Long-term borrowings 1,250 1,134 1,834 2,302 3,093 4,028 4,940
Total Interest Expense 7,033 7,283 8,338 9,333 10,738 12,341 13,947
Net income from interest and dividends 25,966 30,783 33,126 36,095 39,233 43,274 47,648
Bad debt and doubtful accounts (reversal) -6,159 599 665 737 819 931 1,046
Loss on debt restructuring 8,919 3,063 3,063 3,063 3,063 3,063 3,063
Net income from interest and dividends after bad debt and
doubtful accounts (reversal) and loss on debt restructuring 23,206 27,121 29,398 32,295 35,351 39,280 43,538
Non-interest income
Gain on investments 2,143 427 427 427 427 427 427
Share of profit (loss) from investments on equity method 82 -35 -35 -35 -35 -35 -35
Fees and service income
Acceptances, aval and guarantees 577 685 765 860 969 1,104 1,249
Others 7,530 8,656 9,672 10,864 12,238 13,947 15,783
Gain on exchanges 1,806 1,129 1,129 1,129 1,129 1,129 1,129
Loss on transfer of financial assets -569
Other income 580 1,440 1,440 1,440 1,440 1,440 1,440
Total Non-interest Income 12,149 12,302 13,399 14,685 16,168 18,012 19,993
Thammasat
Income Statement/2
Non-interest expenses
Personnel expenses 6,564 7,841 8,541 9,358 10,296 11,462 12,701
Premises and equipment expenses 3,814 3,525 4,991 5,680 7,406 8,760 8,850
Taxes and duties 1,386 1,677 1,827 2,001 2,202 2,451 2,716
Fees and service expenses 3,210 2,968 3,316 3,725 4,196 4,782 5,412
Directors’ remuneration 55 72 72 72 72 72 72
Loss on impairment of properties foreclosed 705 201 201 201 201 201 201
Incremental Recommendation Expense 700 1,150 970 770 660
Contributions to Financial Institutions Development Fund 2,802 2,826 2,826 2,826 2,826 2,826 2,826
Other expenses 1,311 2,316 2,316 2,316 2,316 2,316 2,316
Total Non-interest Expenses 19,847 21,426 24,790 27,329 30,486 33,640 35,755
Income before income tax 15,508 17,997 18,007 19,651 21,033 23,652 27,777
Income tax expense 116 4,003 4,005 4,371 4,678 5,261 6,178
Net income before minority interests 15,392 13,994 14,002 15,280 16,355 18,391 21,598
Minority interests in net income -52 -64 -64 -64 -64 -64 -64
Net income 15,340 13,930 13,938 15,216 16,291 18,327 21,534
Thammasat
Fee Income Breakdown - 2005
Gain (Loss) on foreign exchanges 8442 10.93% • The items that directly
Money Transfers and Collection 8420 10.91% related to end consumers
ATM Cards and other e-banking service 7593 9.83% are ATM and Credit Cards.
Credit cards 7246 9.38% Which contribute about
Acceptances, aval, and guarantees 3252 4.21% 20% of the total fee income
• The other items excluding
Management fee 3040 3.94%
others, are mostly stem
Letters of credits 2082 2.70% from business services
Cheque-related fee 1239 1.60% (accounted for about 36%).
Underwriting 693 0.90%
Consultancy 420 0.54%
Securities custodian 414 0.54%
Other fee and services 8561 11.09%
Other non-interest incomes 25809 33.43%
Total Non-Interest income 77212
Thammasat
Assumptions
2005 2006F 2007F 2008F 2009F 2010F

Total Income 50,368 54,862 60,114 66,139 73,627 81,588
Loan Growth - 8.92% 9.57% 10.02% 11.32% 10.81%
Loan Yield 5.04% 5.04% 5.04% 5.04% 5.04% 5.04%
Deposit Growth 5% 6% 7% 7.50% 8% 7.50%
Deposit Cost 0.83% 0.84% 0.85% 0.86% 0.86% 0.85%
Doubtful Expenses to Allowance Ratio 1.72% 1.72% 1.72% 1.72% 1.72% 1.72%
Growth in fee and service income - 11.74% 12.32% 12.65% 13.96% 13.16%
Personal Expense to Sales 15.57% 15.57% 15.57% 15.57% 15.57% 15.57%
Premise and Equipment expense 16.44% 16.44% 16.44% 16.44% 16.44% 16.44%
Taxes and Duty to Total Income 3.33% 3.33% 3.33% 3.33% 3.33% 3.33%
Fee and Services expenses to Fee and service income 31.77% 31.77% 31.77% 31.77% 31.77% 31.77%
Tax Rate 22.24% 22.24% 22.24% 22.24% 22.24% 22.24%
Cash to total income 29.61% 29.61% 29.61% 29.61% 5.16% 11.22%

Interest Receivable to loan 0.28% 0.28% 0.28% 0.28% 0.28% 0.28%
Allowance of doubtful account to loan -5.55% -5.56% -5.56% -5.56% -5.56% -5.56%
Premises to total income 42.57% 55.34% 57.47% 68.11% 72.36% 65.98%
Interbank and money market item liabilities 29.59% 29.59% 29.59% 29.59% 29.59% 29.59%
Depreciation 7.54% 7.54% 7.54% 7.54% 7.54% 7.54%
LT Loan rate 5.62% 5.62% 5.62% 5.62% 5.62% 5.62%

ST Loan rate 0.78% 0.78% 0.78% 0.78% 0.78% 0.78%
Thammasat
Ratios
2004 2005 2006F 2007F 2008F 2009F 2010F

Liquidity Ratio
Liquid asset to deposit 0.20 0.21 0.20 0.19 0.18 0.15 0.14
Loan to Deposit 77.77% 85.97% 89.77% 93.10% 96.38% 101.48% 106.15%
Profitability Ratio
Net Interest Margin 2.90% 3.38% 3.38% 3.38% 3.38% 3.38% 3.38%
Funding cost 0.96% 1.02% 1.08% 1.12% 1.17% 1.24% 1.27%
Deposit Cost 0.79% 0.83% 0.82% 0.84% 0.85% 0.86% 0.86%
Asset Yield 4.49% 5.03% 5.06% 5.10% 5.14% 5.13% 5.14%
ROE 23.01% 17.83% 15.14% 14.18% 13.18% 12.92% 13.18%
ROA 1.86% 1.66% 1.53% 1.54% 1.51% 1.55% 1.65%
Thammasat
Cost Estimation Justification
• The capital expense items are quite difficult to trace back directly to our
recommendations, but they’re required to support the growth resulting from our
recommendation none the less.
• This is the expenses item that are in different amount depending on which phase
they’re on (in Millions of Baht)
Product/ Enhancement 2006 2007 2008 2009 2010

Research & Development 200 150 100 100 100
CRM 300 250 200 200 200
K-Answer Campaign 300 400 300 200
E-channel 100 70 70 60
Synergy
Promote internal communication and training 200 100
Customer Reachout Campaign 250 200 100 100
Total Expense 700 1150 970 770 660
Thammasat
Financing Options Justification
• In order to support the capital expense and the on-going operation, external
financing is needed.
• Long-Term obligation
• Not just long-term debt, also include hire-purchase contract, leasing
contract, etc.
• Used mainly to financed the capital expenditure.
• Borrowing timing:
2006 2007 2008 2009 2010
12,464 8,330 14,064 16,653 16,222
• Short – Term Debt Instrument
• Used mainly for short-term financing of the asset to carry on the normal
operation
• Borrowing Timing:
2006 2007 2008 2009 2010
5,814 2,927 5,408 1,187 14,580
Thammasat
Return on Investment Justification
• Estimated WACC = 11.09%

• Inflows & Outflows
Inflows (Net Income) 15,214 16,921 19,430 22,537 25,823
Outflow (CAPEX) 11,209 6,791 13,898 12,252 4,611
• PV of Inflows = 71,647 Mn B
• PV of Outflows = 36,503 Mn B
• NPV = 35,144 MnB
• Profitability Index = 1.96
• Pay back Period = 2.86 Years
Thammasat
Revenue Breakdown – KBANK Historical
2005 % 2004 %
Interest and dividend income 38,066 75.58% 32,999 73.09%
1. Loans 31,628 62.79% 27,712 61.38%
2. Interbank and MMI 2,387 4.74% 1,527 3.38%
3. Investments 4,051 8.04% 3,760 8.33%
Non-Interest Income 12,302 24.42% 12,149 26.91%
1. Fee and Service Income 9,342 18.55% 8,108 17.96%
2. Gains on Exchange 1,129 2.24% 1,806 4.00%
3. Other Income 1,831 3.64% 2,235 4.95%
Total Income 50,368 45,148
Thammasat
Intense Competition
1997 1998 2000 2006
BOT’s “Financial Master

Plan” NPL s decreased to 8.29%
(FMP)
M&A of Small and Banks: Declining in

Medium Banks Number but Increasing in
Size
Promote “Universal Major Thai Banks:
Intense Banks” Currently Offering Full
Competition Ranges of Financial
Services
Opening FTA with USA Allow 100% ownership
of foreign financial
institution in Thai
banks
Superior Financial
Strength and Economy
of Scale
Thammasat
Customer Characteristics
Corporate SME 36.39%

45.45%
End consumer
18.16%
• Low growth • Medium growth

• Low NIM • Medium NIM
• Price sensitive • High growth
• Relationship oriented • High NIM
• Requires physical
accessibility
Thammasat

@KBank Final

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Thammasat

KasikornBank Group Consulting

1997 1998 2000 2006

Financial NPLs = 43% of

1997 1998 2000 2006

BOT’s “Financial Master

M&A of Small and

1997 1998 2000 2006

Slow Down in Economy

Industry Customer Segment

Corporate SME 36.39%

Industry Customer Segment

Where Kasikorn Is Where Kasikorn Wants to Acheive

One of the top 5 Maintain the

Intense Maintain leading position

Strengthenin Create & realize synergy

ng Off Intense Competition and Maintain Leadership Position in Banking Business

ng Off Intense Competition and Maintain Leadership Position in Banking Business

SMEs End Consumers

Size of Account Bigger

Current Position in the Rank 1 : Rank 4 :

Product + Service Features

Product/Service Recent Campaign : K Heroes

+ Target Audience: General Consumers

Our Proposing Campaign…

+ K-Answer : Your Ultimate Solution

Professional + Personal Consultant

Enhancing Collaboration Among Subsidiaries

Synergy Formulation Strategy

Collaborative Process Enhancement

Collaborative Process Enhancement

SME Winning Strategy

Features R&D Setting Up Fully-Functional & Develop new products

E-Channel Promotion Prepare & Testing Communicate to customers

Synergy Formulation Strategy

Collaboration and Leadership

• Increase Availability Expand subsidiaries presence

• Promotional Package Package Design Bundling and Cross-selling

2005 2006F 2007F 2008F 2009F 2010F

80,000 CAGR = 10.13%

2005 2006F 2007F 2008F 2009F 2010F

E-channel Promotion 60-100M / Year

Synergy Formulation Strategy

Total Expense 660-1150 Mb /Year

Financing Option Return on Investment

• 67.73 BnB from Long-Term • NPV = 35.14 BnB

• The rest can be financed

Target Selection Maintain

Strengthening Collaboration Create & Realize

To Maintain the Leadership Position in terms of Size and

• Company Profile • Timeline

Competitive •Brand power •Transaction •Retail banking •Range of • N/A •Economies of

NPL 10.9% 10.9% 9.3% 8.9% 12.1% N/A

Customer Corporate  SME  Individual SME SME &Individual N/A

Revenue 75,045.24 57,702.17 49,484.90 million 50,367.49 31,714.40 N/A

Position Long Convenient & Modern Modern N/A N/A

Revenue 9.89% 4.57% 0.78% 11.69% 43.32% N/A

Threat of New Entrants

• Customer relationship management is the main point in

• We are not neglecting the physical branch the E-Branch

• Provides as an alternative channel of Payment

• Even though the cost-income ratio is higher than other top

• High Bargaining Power and price sensitive